Moody’s Investors Service last week upgraded El Camino Hospital’s revenue bond rating from A2 to A1, following a review of the hospital’s progress since Moody’s issued its last rating in 2010.

According to Moody’s, the rating upgrade affects $186.9 million of outstanding fixed and variable rate demand revenue bonds issued by the Santa Clara Financing Authority.

“Hospital leadership has worked with the hospital board to expand the governance structure to include community leaders with significant subject-matter expertise, hired nationally known industry leaders to fill the CFO and COO roles, and produced a strategic plan to position us for health reform to effectively meet the needs of our community,” said El Camino Hospital President and CEO Tomi Ryba. “Recognition of the relevance of these improvements by Moody’s is gratifying.”

The report highlighted a number of the hospital’s strengths:

• It is a sizable community hospital located in a geographically favorable area with an operating revenue base of $664 million in fiscal year 2012.

• Its fiscal year 2013 outlook shows another year of strong profitability and operating cash-flow generation, as well as double-digit cash-flow margins.

• It shows steady growth in unrestricted cash and investments to $490 million as of Dec. 31.

• It carries a low debt load.

• Its facilities in Mountain View and Los Gatos are 95 percent seismic compliant through 2030, with the final 5 percent being 2030-compliant upon completion of minor voluntary upgrades, in accordance with approved extensions, by Jan. 1, 2015.

“We are extremely pleased that Moody’s recognized the hard work the hospital has undertaken in the last two years to stabilize and strengthen this valuable community hospital,” said John Zoglin, chairman of the El Camino Hospital Board of Directors. “To receive an upgraded rating at a time when so many other hospitals and hospital systems nationwide are struggling further reinforces that we have the right management team, an enhanced governance structure and long-term strategies in place that will enable us to make the necessary investments to care for the community.”

Moody’s issued a “stable outlook” for the hospital but also acknowledged several challenges it currently faces. Among other things, the Moody’s report cited a highly competitive marketplace in the Bay Area for services; its historical dependence on the Palo Alto Medical Foundation (now affiliated with Sutter Health), which has been responsible for approximately 50 percent of El Camino Hospital’s admissions; and the current uncertainty around Measure M, which caps executive salaries at no more than double the salary of the California governor.

Still, the report noted that it expects El Camino Hospital to “continue to produce strong operating cash flow given its favorable market presence and location and its continued focus on operating efficiencies, in order to support future capital plans, maintain solid liquidity and leverage measures and offset any future reimbursement declines and new competitive pressures.